Southwestern Power Administration Briefing- Texoma Region Public Meeting

1. Texoma Regional Public Meeting April 4, 2014 Fritha Ohlson Director, Division of Resources & Rates

2. Southwestern Power Administration Topics SWPA General Information SWPA Customers SWPA System U.S. Electric Grid Interconnections & SWPA System Map SWPA Rates Denison Hydropower Funds Returned to U.S. Treasury SWPA Denison Drought Operations Generation Data SWPA Denison Outlook Recap

3. SWPA General Information Southwestern Power Administration (SWPA) Agency of the US Department of Energy Power Marketing Administration Section 5 of the Flood Control Act of 1944 “…encourage most widespread use at lowest possible rates… …sound business principles… …preference to public bodies and cooperatives.” Cost based rates; not for profit Repay Federal Investment

4. Southwestern Power Administration SWPA General Information

5. Southwestern Power Administration SWPA Customers SWPA markets cost-based, wholesale power to not-for-profit preference customers in six states: Arkansas, Kansas, Louisiana, Missouri, Oklahoma, and Texas. Over 100 customers 21 Cooperatives 78 Municipalities 3 Military installations Over 8 million end users

6. SWPA System SWPA markets hydropower from 24 Federal, multi-purpose hydropower projects owned by the U.S. Army Corps of Engineers (Corps). Marketed capacity: 2,052.6 MW Average annual energy: 5,570,000 MWh SWPA operates 1,380 miles of high-voltage transmission line, 25 substations, and 46 communications sites. Of the 24 hydropower projects, 19 are operated as an Interconnected System within the Southwest Power Pool (SPP) region (Eastern Interconnection). Denison (Lake Texoma), which is one of the 5 remaining electrically isolated projects, is within the ERCOT region (ERCOT Interconnection). Southwestern Power Administration

7. U.S. Electric Grid Interconnections Southwestern Power Administration

8. Southwestern Power Administration SWPA System Map Disconnected

9. SWPA Rates Cost Based – 100% of hydropower cost and the allocated percent of joint-use costs unique to each project: -Initial construction costs -Interest during construction -Interest on investment -Annual operation and maintenance -New replacement equipment 22 of 24 projects – including Denison – are blended together to make the “Integrated System Rate.” There are 2 other rate systems, Sam Rayburn and Robert Willis, both isolated projects in Texas. Although Denison, Narrows, and Whitney are electrically isolated, they are financially integrated. Southwestern Power Administration

10. Denison Hydropower Denison is located in the ERCOT region and contractually its full output is received by two Texas Electric Cooperatives: Tex-La and Rayburn Country Based on current SWPA rates and an average hydrological year, the annual revenue returned to the U.S. Treasury from Denison generation is about $6 million. The estimated annual replacement cost is nearly $19 million. Important power resource for the region providing quick-response peaking power. In an average hydrological year, the clean, renewable generation from Denison prevents the emission of 182,200 tons of greenhouse gases by offsetting the need for fossil fuel generation (1.9 billion cubic feet of natural gas or 113,900 tons of coal). Southwestern Power Administration

11. Distribution of Funds Returned to U.S. Treasury by SWPA Southwestern Power Administration 24 Projects Denison Original Investment $788 Million $30 Million Interest $772 Million $25 Million Operations & Maintenance $1,255 Million $75 Million Total $2,815 Million $130 Million As of fiscal year ending September 30, 2013 (unaudited)

12. Funds Returned to U.S. Treasury from Lake Texoma Southwestern Power Administration

13. Drought 2011-14 Texoma Inflow and Elev. Southwestern Power Administration

14. SWPA Denison Drought Operations Southwestern Power Administration SWPA strictly adheres to the Corps’ Lake Texoma Water Control Manual and Drought Contingency Plan Southwestern operates in full compliance with Public Law 100-71 Between 617-612 feet: Normal generation Between 612-607 feet: Rapid response, short term peaking Between 607-590 feet: Critical power needs The project is designed so that inflows combined with the conservation pool storage provide a reliable water source for the water supply and hydropower authorized purposes to which conservation pool storage is allocated, especially during times of drought.

15. SWPA Denison Drought Operations Southwestern Power Administration SWPA has been operating in drought mode since January 2011, generating only 25% of average. Since May 2012, generation has been even less, about 19% of average. 2013 – Lowest year of power generation ever since generation began at Denison in 1945. In 2013, SWPA customers spent over $5,000,000 to replace hydropower usually produced at Denison.

16. Historical Generation Southwestern Power Administration

17. 2011-2014 Monthly Generation Southwestern Power Administration

18. SWPA Denison Outlook Southwestern Power Administration Will continue to operate the generation at Denison pursuant to PL 100-71, Corps regulations and approved plans, and SWPA’s Federal contracts. Member of Lake Texoma Advisory Committee. Generation outlook is mindful of drought conditions. SWPA customers predict that this trend will continue in 2014 if low water levels persist, and that they will continue replacing hydropower usually generated out of Denison with power purchased from other sources.

19. Lake Texoma Pool Elevation 2014 Outlook Assumptions: Current level water supply use; 2011 evaporation; Median Inflow at 2, 4, and 6 hours/day generation ; Historical Low Inflow (2011) at 2 and 4 hours/day generation .

20. Recap Southwestern Power Administration Lake Texoma drought conditions: 2011-present. Denison hydropower generation at historical lows. Lake Texoma conservation storage is working as designed. SWPA will continue to operate in drought mode until the Lake Texoma Red River watershed recovers, pursuant to all applicable laws, regulations, and Federal contracts.